Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI VIJAY PAL RAO(SMC)
u/s 143(3) and a penalty order u/s 271(1)(C) of the Act respectively for the year 2006-07.
First I take up quantum appeal, wherein the assessee has raised the following grounds;
ITA No.1180(B)/2014
“1. The order passed y the AO is bad in law, without jurisdiction and in any case without complying with the provisions of law. The impugned order being void ab initio is required to be cancelled in entirety.
2. In any case, the ld.AO has erred in passing the order in the manner passed by him and the ld.CIT(A) has erred in partially confirming the same. The order passed by the CIT(A) to the extent confirming the penalty order passed by the AO is ad in law and is liable to be quashed.
3. In any case and without prejudice, the notice issued proposing levy of penalty, being not proper, all the consequential proceedings become non-est in law and are liable to be quashed.
4. In any case and without further prejudice, the ground for initiation levy of penalty and the ground for sustaining the penalty being different, the order passed by the authorities below become bad in law and are liable to be quashed.
5. In any case, the ld.AO had erred in holding that provisions of Section u/s 271(1)© are applicable and in levying penalty u/s 271(1)(c ) of the Act and the ld.CIT(A) has erred in partially confirming the same. The provisions of section 71(1) (c ) of the Act being not applicable, the penalty confirming the same. The provisions of section 271(1)c ) of the Act being not applicable, the penalty levied s to be cancelled.
6. In any case and without prejudice the learned AO has erred in levying penalty at the minimum rate (300%) and the CIT(A) has erred in confirming the same. The penalty as levied/sustained being erroneous as well as excessive is to be deleted.
7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the penalty impugned order be quashed or at least the penalty as levied/sustained be deleted entirely”.
ITA No.1181(B)/2014
“1. The ld.AO had erred in passing the order in the manner passed y him and the ld.CIT(A) has erred in partially confirming the same. The order passed by CIT(A) is bad in law to the extent it confirms the assessment order and is liable to be quashed.
2. In any case, the ld.AO had erred in making various additions to the income returned and ld.CIT(A) has erred in partially confirming the same. On proper appreciation of facts and circumstances of the case and the law applicable, the additions as sustained are to be deleted and the income as returned is to be accepted.
3. The ld.AO has erred in making an addition u/s 69 of the IT Act holding that the investments in Mutual Fund amounting to Rs.2,24,362/- are unexplained investments and the ld.CIT(A) has erred in confirming the same. The entire investments are duly explainable with source. The addition having been made without properly appreciating the facts of the case requires to be deleted.
4. The ld.AO had erred in adding a sum of Rs.5,29,250/- as unexplained receipts and the ld.CIT(A) has erred in partially confirming the same to the extent of Rs.1,45,250/-. The appellant never received any professional/unexplained receipts. The addition is sustained being wholly erroneous contrary to available facts and law is to be deleted in entirety.
5.1 The AO had erred in taxing the loan received as income by holding it to be non-existent and unproven liability.
(i) by rejecting the explanation offered by the appellant (ii) by disregarding the confirmation letter filed. And the CIT(A) has erred in confirming the same.
The action of the authorities below contrary to available facts and law is to be disregarded and addition as made/sustained is to be deleted.
5.2. The observations/findings of CIT(A) while sustaining the above addition are totally erroneous on facts are to be rejected in toto.
6. The appellant also denies the liability to pay interest u/s 234B. The interest levied being erroneous is to be deleted.
7. In view of the above and other grounds to be adduced at the time of hearing, it is requested that various additions made/sustained be deleted in entirety and income as returned be accepted”.
Ground no.1 & 2 are general in natur3 and does not require any specific adjudication.
4. Ground no.3 is regarding addition made u/s 69 of the Act on account of unexplained investments in mutual fund.
During the course of assessment proceedings, the AO noted from the bank statement of the assessee that the assessee has various credits into his account totaling Rs.27,91,591/- In response to the query, the assessee furnished statement of receipt and payments. The AO noted that a sum of Rs.2,24,362/- have been credited to assessee’s account and th4e same are stated to be from personnel sources. The assessee explained that the amount was received from parents for investments in mutual funds, because the bank deposits were fetching far lower rate of return. The assessee further explained that the amount was invested in assessee’s name since her parents were not having pan number. The AO did not accept the explanation of the assessee being vague statement.
Accordingly, the AO made addition of Rs.2,24,362/- u/s 69 of the Act, as unexplained investment.
On appeal, the CIT(A) has confirmed the addition made by the AO on the ground that the assessee has not supported its claim by any evidence and further, the assessee does not maintain regular books of accounts.
Before the Tribunal the learned AR of the assessee submitted that the small amount of Rs.2,24,362/- was received by the assesee from her parents which was deposited in the bank account of the assessee. Since the parents of the assessee already died, therefore, the asseswsee was not in position to produce any evidence or confirmation from her parents.
On the other hand, the learned DR has relied upon the orders of the authorities below and submitted that the assessee has failed to produce any evidence in support of its claim. Further, the explanation of the assessee is vague without giving any source of the fund even in the hand of her parents.
Having considered the rival submissions and relevant material on record, I note that the only explanation furnished by the assessee in respect of Rs.2,24,362/- being deposited in the bank account of the assessee is that the assessee received the said amount from her parents.
There is no quarrel on the point when an amount was found and deposited in bank account of the assessee. The onus is on the assessee to explain the source of the amount with tangible material. Though, in the case in hand, the assessee has stated that her parents had expired and the assesee could not produce any evidence in support of the claim however, the assessee could have explained the source of this amount in the hands of her parents by giving the details of income or other source of receipt in the case of her parents. In the absence of any such details the plea of the assessee that due to the demise of her parents the assessee could not produce the evidence cannot be accepted in discharging the onus of proving the claim. Therefore, in the absence of any plausible explanation of source of the said amount of Rs.2,24,362/- as well as any other evidence, we do not find any error or illegality in the order of the authorities below in making this addition u/s 69 of the Act.
Ground no.4 is regarding confirmation of addition of Rs.1,90,000/- as unexplained receipts. The assessee is a Director of M/s Vaman Pharma Pvt.Ltd., and filed her return of income showing remuneration of Rs.3,84,000/- with TDS. From the AIR filed by the company, the AO found that the assesee has been paid a total amount of Rs.5,29,250/- during the year. On query, the assessee explained that the Air information was incorrectly filed and no other amount on account of fee for technical service has been received by the assessee except the remuneration of Rs.3,84,000/-. The assessee further explained the mistake had arisen due to filing of TDS return for professional charges, but it was salary. The AO did not accept the contention of the assessee and mad an addition on total amount of Rs.5,29,250/- shown in the AIR information.
On appeal, the CIT(A) has restricted the addition to Rs.1,45,250/- by allowing the claim to the extent of remuneration received by the assessee of Rs.3,84,000/-.
Before the Tribunal learned AR of the assessee has submitted that the amount of Rs.1,45,250/- shown in the AIR represents fees paid to the persons/medical representatives who did not have Pan number and had left the job. Therefore, due to this mistake this amount was included in the assessee’s hand and shown as part of remuneration cost against the actual remuneration of Rs.3,84,000/- The assessee has also produced a copy of revised TDS certificate alongwith the evidence in support of her contention that the mistake of showing her remuneration as professional receipt has started the whole problem. Thus, the learned AR has submitted that the assessee produced the relevant evidence to show that this amount was shown in the TDS return because of the mistake and which was rectified by filing the revised TDS certificate issued by the company. He has referred the details of the payment to various persons who do not have PAN number and therefore, the amount was paid to these persons and not to the assessee. The learned AR has referred to the P&L account and submitted that the payment is separately shown as professional charges and is not part of remuneration paid to the assessee. He has relied upon the following decisions.
a) Mrs Aartiraman Vs DCIT ITA MP 245/Bang/2009 (6-8) b) DCIT Vs G.Selva Kumar –ITA NO.867/Bang/2010 (12-14) c) A.F Ferguson & Co. Mumbai Vs JCIT –ITA No.5037/M/2012(16-19) d) RBNS Naidu Vs CIT 29 ITR 194 (20-23)
On the other hand, learned DR relied upon the order of the CIT(A) and submitted that the assessee had failed to offer the said amount of Rs.1,45,250/- which is rightly brought to tax by the AO and confirmed by the CIT(A). He has further submitted that the assessee has shifted its stand before the CIT(A) by claimed the said amount pertains to the payment to the professional/medical representatives who did not have PAN, whereas before the AO the assessee has claimed that the said amount represents the loan.
I have considered the rival submissions and the relevant materials on record. The AO made the addition of entire amount shown in AIR which includes the remuneration of Rs.3,484,000/- which was duly disclosed and offered by the assessee to tax. The dispute before the Tribunal is with respect to the addition of Rs.1,45,000/- out of the total amount of Rs.5,29,250/- shown in the AIR, I find that the assessee has produced a copy of revised certificate alongwith the details of the payments made to the various professional/medical representatives. It is clear from the revised TDS certificate that the payment to the assessee on account of remuneration made by the company was only Rs.3,84,000/-.
Therefore, it is a case of mistake in the AIR and TDS return filed by the company. Once the mistake has been accepted by the co. in the AIR than the said amount cannot be assessed to tax in the hand of the assessee. I find that the assessee produced all the relevant record to show that this amount was mistakenly shown and included in the account of the assessee instead of the payment made to the medical representatives/professionals. Therefore, when the assessee has explained the correct facts and also produced the relevant evidence to show that this amount was mistakenly shown in the AIR, no addition is called for. Accordingly, the addition confirmed by the CIT(A) to the extent of Rs.1,45,250/- is deleted.
Ground no.5 regarding the addition on account of loan treated as non-existence/unproven liability.
The assessee claimed to have availed a loan of Rs.1,90,000/- during the year. The assessee furnished a confirmation from the creditor before the AO which was rejected by the AO for want of PAN and bank statement of the creditor. Before the CIT(A) the assessee filed a confirmation letter dated 23-12-2008 and other details of the loan. The CIT(A) asked the AO to submit a remand report. After the remand report of the AO, the CIT(A) has confirmed the addition made by the AO by rejecting the additional evidence.
I have heard the learned AR as well as the learned DR and considered the relevant material on record. It is noted that the AO rejected the confirmation filed by the assessee on the ground that PAN and bank statements of creditor were not furnished by the assessee. Before the CIT(A), the assessee furnished the confirmation along with the pan number as well as the details of the cheque of the loan taken. I find that the CIT(A) asked the AO to furnish the remand report which was furnished by the AO on 28-01-2013. The AO raised the objection in the remand report that the new evidence furnished by the assessee need to be rejected.
The CIT(A) instead of considering the evidence furnished by the assessee alongwith the PAN and cheque details refused to admit the additional evidence and consequently, confirmed the addition. It is pertinent to note that once the additional evidence furnished by the assessee was forwarded to the AO for examining the question of subsequent rejection of additional evidence for admitting does not arise. Once the CIT(A) has decided that the evidence should be examined by the AO and furnish a remand report than, the issue ought to have been decided on merits after considering the additional evidence. It is evident that the assessee has made up the deficiency in the original confirmation on account of non-furnishing of PAN and bank statements than, the additional evidence in the shape of confirmation alongwith the PAN and cheque details should have been examined on merits instead of rejecting the evidence at threshold. After going through the evidence produced by the assessee, I find that the creditor has confirmed the loan provided to the assessee of Rs.1,90,000/-.
The assessee has also produced the PAN of the creditor. Therefore, the objection raised in the assessment proceedings was complied with by the assessee, before the CIT(A) and in the remand proceedings. When the assessee has produced confirmation alongwith the PAN of the creditor, the assessee has discharged its onus of proving the claim. Therefore, in the absence of any contrary finding, the claim of the assessee cannot be denied. Accordingly, the addition of Rs.1,90,000/- on account of unproven liability of loan is deleted.
In penalty appeal, the assessee raised the following grounds;
“ “1. The order passed y the AO is bad in law, without jurisdiction and in any case without complying with the provisions of law. The impugned order being void ab initio is required to be cancelled in entirety.
2. In any case, the ld.AO has erred in passing the order in the manner passed by him and the ld.CIT(A) has erred in partially confirming the same. The order passed by the CIT(A) to the extent confirming the penalty order passed by the AO is ad in law and is liable to be quashed.
3. In any case and without prejudice, the notice issued proposing levy of penalty, being not proper, all the consequential proceedings become non-est in law and are liable to be quashed.
4. In any case and without further prejudice, the ground for initiation levy of penalty and the ground for sustaining the penalty being different, the order passed by the authorities below become bad in law and are liable to be quashed.
5. In any case, the ld.AO had erred in holding that provisions of Section u/s 271(1)© are applicable and in levying penalty u/s 271(1)(c ) of the Act and the ld.CIT(A) has erred in partially confirming the same. The provisions of section 71(1) (c ) of the Act being not applicable, the penalty confirming the same. The provisions of section 271(1)c ) of the Act being not applicable, the penalty levied s to be cancelled.
6. In any case and without prejudice the learned AO has erred in levying penalty at the minimum rate (300%) and the CIT(A) has erred in confirming the same. The penalty as levied/sustained being erroneous as well as excessive is to be deleted.
7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the penalty impugned order be quashed or at least the penalty as levied/sustained be deleted entirely”.
I have heard the learned DR as well as the learned AR and considered the relevant material on record. Since in the quantum appeal addition made on account of AIR information and on account of loan has been deleted. Therefore, the penalty against such addition would not survive.
The only issue of levy of penalty remains to be considered is against the addition u/s 69 of the IT Act as unexplained investments. As I have already discussed that the assessee claimed to have received a sum of Rs.2,24,362/- from her parents who had expired. The assessee explained before the AO in the assessment proceedings that the assessee could not produce any documentary evidence because her parents have already expired. Though, for the purpose of assessment explanation furnished by the assessee was not satisfactory and therefore, led to the addition of amount u/s 69 of the Act, however, even the assesee is not able to substantiate and failed to prove the claim if such explanation is bonafide than, no penalty cannot be levied in respect of such addition of income. In the case in hand, the assessee has explained that due to the death of her parents, the assessee could not produce the evidence. In my considered view, the said explanation is bonafide and the fact that her parents have already died is not in dispute therefore, even the assessee failed to substantiate its claim, the penalty in respect of the addition made u/s 69 is not sustainable. Accordingly, the same is deleted.
In the result, the quantum appeal is partly allowed and the penalty appeal is allowed.
Pronounced in the open Court on the 24-07-2015